An income redistribution plan will not end poverty
A more responsive public support system for education, nutrition, health and agriculture can be transformative
The BJP and the Congress have announced separate income redistribution plans ahead of the general election. While the Congress has promised a Minimum Income Guarantee Scheme (MIGS), the BJP announced a basic income plan for farmers — Pradhan Mantri Kisan Samman Nidhi (PMKSN) — in the interim budget.
While both schemes may address certain aspects of inequality by ensuring a basic income, they will not eradicate poverty. Poverty is measured as deficits in income or consumption, but the underlying causes of these shortages are linked to human capabilities and access to resources. As poverty is rooted in deficient capabilities, any income support scheme can at best be a welcome addition. It is not sufficient to deal with structural conditions, which lead to inter-generational poverty in diverse social groups.
Under the PMKSN scheme, farmers (who have less than two hectares of land) will receive ~6,000 per year. But this amount is insufficient even to buy basic farm inputs. In fact, the Telangana and Odisha governments have initiated far more comprehensive income support plans for farmers. Under Odisha’s proposed KALIA scheme, all farmers, including sharecroppers and landless households, have been promised ~10,000 per family as assistance for five cropping seasons between 2018-19 and 2021-22. The Rythu-bandhu scheme in Telangana is paying eligible farmers ~4,000 per acre for the kharif season of 2018.
Several studies have shown that a cash transfer scheme such as MIGS or PMKSN cannot be substituted for subsidies and other institutional support systems such as the National Food Security Act-powered public distribution system. In fact, such cash transfer schemes could be counterproductive and may lead to more distress. Moreover, experiences from the implementation logjam of other welfare schemes raise the concern of exclusion errors and leakages. Uncertainties in receiving uniform and periodic cash payment would reduce the validity of the scheme as income. Targeting errors are also likely.
We must also keep in mind that the banking system often fails to reach farmers in remote locations. As some of the states roll out such schemes, the complexities of beneficiary identification and delivery challenges in diverse local contexts are already evident. There is no evidence to say that cash transfers have remedied leakage in the implementation of existing welfare programmes.
If the West has been hesitant to adopt universal basic income as a model for welfare, it is because of these shortcomings. Underlying the concept of Migs/universal basic income is the acceptance that standard notions of labour and employment are changing. Work is now more likely to be flexible, uncertain and part time. This situation is not novel for the millions of Indians working in the informal economy and agriculture. A more accountable, responsive public support for health, education, nutrition and agriculture is the need of the hour.